Smart Shopping

The key to comparison shopping is to know what insurance coverages you need before you start and then to find out how much those coverages will cost from a number of insurers. Comparison shopping takes time but will save you money.

Different companies charge different rates for the same coverage.

No one wants to pay more for their home insurance than they absolutely have to. The only way you can make certain you are not paying too much is to shop around. Find out what different insurers charge for identical products and services.

Information is available to consumers from a number of unbiased sources. These sources include public libraries, state insurance departments, consumer groups and consumer publications.

Because the insurance industry, like many other industries, has developed many words not commonly used by the average person, consumers may need to find a good glossary or dictionary of insurance terms from the public library.

Consumers may also obtain a wide variety of information from their state insurance department. Most insurance departments publish home insurance guides that contain information specific to that particular jurisdiction. Every state insurance department has personnel available to answer questions regarding home insurance coverage.

Many state insurance departments help the citizens of their state to comparison shop by publishing premium comparisons. Premium comparisons survey the insurance companies with regard to their rates for a number of locations and typical policyholders. The results of the survey are published for public use. If your insurance department publishes a premium comparison, it can only be used to give you a general idea of rates available in your state. For specific information, you must contact individual insurers. However, premium comparisons may help you to narrow your choice of insurers or producers you want to call.

When you begin to contact insurers, there are a few things you should know about how insurance companies market their products.

Most insurance companies and many producers advertise. Do an internet search, or check the newspaper and yellow pages of the telephone directory for companies and producers in your area. In addition, contact your neighbors, relatives and friends for recommendations on insurance companies and producers. Ask them about their experience regarding price and service. In particular ask them what kind of claim service they have received from the companies they recommend.

Consumers often rely on their insurance producer or company to tell them what kind of coverage they need. Insurance producers are paid on a commission basis. Remember, competition only works if the consumer shops for coverage.

When shopping for home insurance, premium quotations are a useful tool for comparison of different companies' products. When asking for price quotations, it is crucial that you provide the same information to each prodcuer or company.

To give you an accurate quote the producer or company will usually request the following information:

  • description of your house;
  • distance from the nearest fire department and fire hydrant;
  • square footage;
  • security devices;
  • a picture of your home;
  • the coverages; and
  • limits you want.

This information is necessary to the rating process described earlier in this guide.

You should understand that not all insurance companies use insurance producers to sell their product. Insurance companies generally use one of three methods to market their product: direct marketing, independent producers or exclusive producers. The type of marketing method may be good or bad for a consumer, depending on the type of services offered. Therefore, consumers should be aware of each of the three methods and may want to consider them in their purchase decision.

Direct marketers sell insurance through the mail and by telephone. In some cases, consumers can save money with direct marketers because these companies do not have to pay insurance producers commissions to sell their policies. Companies can pass along some of these savings to the consumer. However, some consumers prefer to pay an additional premium for the opportunity to have a local producer available to them.

If you decide to call producers for quotations, ask them how many companies they represent. Independent producers represent several companies; therefore, you can get quotes for more than one company from one producer. This is considered an advantage to many consumers.

Some insurance companies sell coverage through producers that only represent their company. These companies call their producers an exclusive agency force. Exclusive producers can only offer you coverage from the company they represent; therefore, you can only get a quote from one company for each exclusive producer that you talk to.

Sometimes exclusive producers may work for a lower rate of commission than independent producers. This is because companies do not have to give the producer an incentive to write their product over another company's product. The lower commission structure, especially on commissions for renewal business,can represent significant cost savings to the insurance company and often a portion of that savings is passed along to the consumer in lower premiums.

Once you have selected the insurance coverages you need and an insurance producer or company, there are steps you can take to make certain you get your money' s worth.

Before signing an application for any insurance coverage, call your state insurance department and verify that the company and the producer you are dealing with are licensed in your state. It is illegal for unlicensed insurers to sell insurance. Business cards are not proof of a licensed insurance producer or company. If you do business with an unlicensed producer or company, you have no guarantee that the coverage you pay for will ever be honored. If you purchase insurance from companies not legally doing business within your state, you will not be protected by the guaranty fund should the company fail.

Every state has a safety net to protect insurance consumers from financial loss in the rare instance that a company becomes insolvent. This safety net is called a "guaranty fund."; The guaranty funds are established by state law and are composed of licensed companies in the state. They pay the claims of policyholders and other claimants of an insolvent company. The money to pay the claims against the insurance company comes from assessments made against all of the insurance companies that are members of the guaranty fund.

If you are contacted by an unlicensed producer or company, call your state insurance department immediately so that regulatory action can be taken. By doing so, you may protect someone less knowledgeable than you from being victimized.

You should be aware that a home insurance policy is a legal contract. It is written so that your rights and responsibilities as well as those of the insurance company are clearly stated. When you purchase home insurance, you will receive a policy. You should read that policy and make certain you understand its contents. If you have questions about your insurance policy, contact your insurance producer or company for clarification. Keep your policy in a safe place and know the name of your insurer. If you still have questions, call your state insurance department.